Los Angeles-based Mercury General Corporation reported that net income was $43.4 million, or $0.80 per share (diluted), in the second quarter 2003 compared with $1.3 million, or $0.02 per share (diluted), in the same period for 2002.
Net operating earnings, a non-GAAP (“Generally Accepted Accounting Principles”) financial measure, in the second quarter of 2003 were $43.5 million, or $0.80 per share, compared with $33.1 million, or $0.61 per share in 2002. For the first six months of 2003, net income and net operating earnings were $85.5 million ($1.57 per share) and $86.1 million ($1.58 per share), respectively which compares to net income and net operating earnings for the same period in 2002 of $30.3 million ($0.56 per share), and $61.9 million, ($1.14 per share), respectively. The Company has included below the definitions of non-GAAP financial measures and a reconciliation of those measures with the most directly comparable GAAP measures.
Company-wide premiums written were $548.5 million in the second quarter 2003, a 22.6 percent increase over 2002 and $1,087.2 million for the six month period, a 25.1 percent increase over 2002. California premiums written were $459.6 million in the quarter, a 20.7 percent increase over 2002 and $912.5 million for the six-month period, a 23.2 percent increase over 2002. The increased premiums were driven by both policy count growth and rate increases.
The combined ratio (GAAP basis) was 94.3 percent for both the second quarter and for the first six-months of 2003 compared to 96.9 percent and 97.7 percent in the respective periods of 2002.
During the second quarter, the Company received approval from the California Department of Insurance to increase its personal automobile rates by 6.9 percent in Mercury Casualty Company and California Automobile Insurance Company and 3.8 percent in Mercury Insurance Company. The Company implemented these rate increases on June 23, 2003.
Net investment income in 2003 decreased by 8.0 percent to $26.7 million in the quarter and by 8.3 percent to $53.6 million for the six-month period compared to the same periods in 2002. The after-tax yield was 4.21 percent on average investments of $2.26 billion (fixed maturities and equities at cost) for the quarter. This compares with 5.07 percent in the second quarter of 2002.
The Company is currently in discussions with New Jersey insurance regulators to enter the New Jersey personal automobile market. Should the Company receive final approval from New Jersey insurance regulators to enter the New Jersey market, it intends to commence New Jersey operations in the third quarter 2003. The Company plans to initially appoint approximately 50 agents throughout the state. New Jersey continues the Company’s expansion outside of California and marks the ninth state in which the Company will write automobile insurance business.
The Company also reported the election of Gabriel Tirador to serve as a member of its Board of Directors. Tirador has served as the Company’s president and COO since Oct. 26, 2001, and prior to that served as its vice president and CFO.
The Board of Directors declared a quarterly dividend of $0.33 per share, representing a 10 percent increase over the quarterly dividend amount paid in 2002. The dividend is to be paid on Sept. 25, 2003 to shareholders of record on Sept. 12, 2003.
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